France and U.S. Move Toward Temporary Truce in Trade War

From New York TimesThe détente emerged after Presidents Macron and Trump agreed to grant more time for talks over a global solution to taxing Amazon, Facebook and other digital giants.

France and the United States appeared to strike a temporary truce in a trans-Atlantic spat, French officials said Tuesday, after President Emmanuel Macron agreed to suspend a tax on American technology giants in exchange for a postponement of threatened retaliatory tariffs on French goods by the Trump administration.

The apparent détente emerged after Mr. Macron and President Trump agreed in a phone call late Sunday to grant more time for negotiations over a global solution to taxing Amazon, Facebook and other digital companies.

“We will work together on a good agreement to avoid tariff escalation,” Mr. Macron said on Twitter on Monday. “Excellent!” Mr. Trump replied on the social media platform.

Mr. Trump, who is at the World Economic Forum in Davos, Switzerland, said on Tuesday that he and Mr. Macron had a “good conversation” and that the United States “is very happy with the result.”

“We appreciate very much what President Macron did,” Mr. Trump said, though he declined to elaborate on what the two leaders had agreed on. White House officials also declined on Tuesday to confirm the scope of the apparent deal. In a statement released late Monday, they said the heads of state had “agreed it is important to complete successful negotiations on the digital services tax.”

A deal between the two countries would buy time for the development of an international framework to prevent large multinational companies and digital giants like Facebook, Amazon and Google from avoiding taxes by shifting profits between countries.

Negotiations are continuing at the Organization for Economic Cooperation and Development, but the slow pace of the talks has frustrated European officials — and especially the French government, which has insisted that digital businesses must pay “fair taxes.”

France’s finance minister, Bruno Le Maire, said Tuesday at a meeting in Brussels with European Union officials that Mr. Macron and Mr. Trump had “agreed to avoid all escalation between the U.S. and France on this digital tax issue.” But he cautioned that discussions on finding a compromise “remain difficult.”

Mr. Le Maire is scheduled to meet with Treasury Secretary Steven Mnuchin in Davos on Wednesday to discuss next steps.

The fight is not just limited to France. Silicon Valley’s tech giants are a target for much of Europe. Last summer, the European Commission unveiled a proposal to significantly revamp how the companies are taxed in the 28-nation European Union.

Many American companies have been increasingly alarmed by the potential proliferation of digital taxes across Europe and other wealthy nations. On Tuesday, Mr. Mnuchin said in an interview with The Wall Street Journal that Britain and Italy could also face tariffs if they imposed digital taxes.

The attempt to prevent global companies from avoiding taxes has intensified a fight between the United States and Europe, as policymakers on both sides of the Atlantic spar over efforts to impose new taxes on foreign firms.

France drew special scorn from Mr. Trump after officials announced plans to impose a 3 percent tax starting Jan. 1 on the revenues that companies earn from providing digital services to French users. The government estimated a windfall of 500 million euros (about $563 million).

Mr. Trump insisted that only the United States could tax American-based companies, and threatened to retaliate with American tariffs of up to 100 percent on French wine, cheese, handbags and more.

On Tuesday, Mr. Le Maire signaled that France would take a step back from the dispute by offering to postpone collection of the tax until the end of 2020, giving time for negotiators at the O.E.C.D., an intergovernmental economic organization with 36 member countries, to reach an agreement on a broader framework to tax digital firms.

The O.E.C.D.’s original proposal, released late last year, would allow countries to tax large multinationals even if they did not operate inside their borders. It suggests companies should pay taxes largely based on where their sales occur.

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